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INR: Fall in rupee not bad news for students going overseas

BY SK DATTA

The Indian rupee (INR) has been depreciating rapidly since January this year. This is, expectedly, making parents of students who want to pursue higher education overseas nervous. This seems to be obvious, since after all the expenses will be made in foreign currency, (majorly US Dollars – USD) which is rapidly increasing in value.

However, a deeper and objective analysis points towards the direction that a weak Rupee should not be a deterrent for students who want to study overseas, especially those who intend to stay on and work overseas for, say, at least 10 years — if not more (which is the case with most of them, any way).

There is a perception that INR has depreciated drastically against the USD. However, when we compare the position against currencies of other countries which are major destinations for Indian students (eg., the UK, Canada, Australia, New Zealand and Singapore), we find that the depreciation against the USD, over last three years, is actually less. And the INR has actually gained against the Pound Sterling (thanks to Brexit).

Let’s take a hypothetical example where a student is aspiring to join a US University in 2018 and will complete his MS in 2020. Let us presume that his annual expenses is USD 50,000. And let us also assume that the INR will depreciate by Rs 15 during this two year period to Rs 89 per USD. If the depreciation is steady (which is not improbable to assume), the average USD-INR rate over the two years would be 81.50. The total expenses for two years (USD 100,000) would increase from Rs 74 lakh to Rs 81.50 lakh, ie by Rs 7.50 lakh. If the student works overseas after the education, this increase of Rs 7.50 lakh (at the then prevailing rate of 89) would translate to approximately USD 8,500- which is quite a pittance compared to what the earning capacity of the student would be.

And, if the student had taken an education loan in India (say of Rs 30 lakh) to fund the overseas education, servicing the loan would be much easier since at the future date, the INR would, by time the repayment commences, be of lower value and the same amount of USD would pay off a much larger amount of the loan which had been availed of in INR.

And, if in reality, the INR does not appreciate so acutely (to 89 in two years), then the whole equation would be even more favorable.

The sum and substance of the above argument is that depreciation of the INR should not be the critical factor for determining whether to study overseas or not. Much more emphasis should be given to other factors like standing of the University / College, potential of the stream to be pursued, quality of life in the overseas country, regulations concerning immigration and facilities extended by the overseas country to international students, etc.

Although with a depreciated INR, there would be additional pay-out at the beginning, it would be more than recouped after successful graduation.




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